Boom or Bust: Miami

Image: Nestled in between the Akoya and La Gorce Palace towers, the 49 year-old Casablanca Condominium is undergoing a 5.5 million dollar recertification.

Investing in affordable housing on Miami Beach is a tricky business. Although present throughout the beach, older and more affordable condominiums are predominately located from 40th street to about 70th street. This includes the Carriage House, Castle Beach Club, Alexander, Corinthian (1967), Casablanca (1948), Pavilion, All Seasons, Tower 41, Marlborough House (1963), and Maison Grande, to name a few. From 40th up towards 70th street, the area is filled with these types of condominiums.

These buildings all have something in common. They are either past due on the required 40 year re-certification or due for one soon. This is critical for a buyer. A 40 year re-certification involves addressing all life safety, mechanical, structural, and electrical issues the building may have. In some cases, these buildings require millions in construction to get them re-certified.

Not having the 40-year re-certification means the city can condemn the building as it did the Castle Beach Club. The Castle Beach Club remains closed and unit owners footing a $25 million bill for necessary re-certification repairs.

Due to the high cost, risk, and inconvenience of the 40-year re-certification process, it is better to buy in a building that has been re-certified.

There are ways to minimize the risk of this type of purchase:

• Your Realtor should have the seller provide you with the minutes of the Board of Directors meetings. Reviewing minutes can also reveal litigation against the Association that a buyer would inherit, the state of political affairs in the building, and any pending projects that may result in special assessments.
• Request a copy of the budget. This will tell you if the reserves are being funded–again, another way of preventing a special assessment.
• Contact the City of Miami Beach’s Building Department. They can provide information regarding the status of the 40-year re-certification as well as an inspection and violation history.

If an older condominium has been re-certified, has well-funded reserves, no litigation, and a relatively stable Board, it may represent a low cost investment and high value potential.